| Failing trust
For this economist and China expert, the main problem is that people in China no longer have much trust in the country’s economy. “That’s why the Chinese government is currently unable to provide sustained support for the economy,” he told DW.
High youth unemployment and the fear that incomes will stagnate are two factors that have led to this loss of confidence.
At a press conference on the measures to promote consumption, Li Chunlin, vice chairman of China’s National Development and Reform Commission, admitted that many Chinese consumers “have very little confidence and are very concerned about the economy.” Now, more effective measures were necessary, he said.
“If you don’t know how the economy is going to develop, then you’re more cautious when it comes to consumption, because of the great uncertainty and also because savings often serve as a retirement pension,” explained Vera Eichenauer, an economic researcher at the Swiss Federal Institute of Technology in Zurich.
“The high number of unemployed young people has an effect on the willingness to spend, because young consumers have no money,” Eichenauer continued. That means parents often have to step in and provide more support, which in turn means they, too, will have less to spend. “China also risks deflation, which means that prices could do down. At first glance, that would be good for consumers. But they would consume less today because they expect an even lower price in the future.”
Read the rest of Mu’s report |
